H  G 


UC-NRLF 


Giro 


State   of /New   York 

ITnsurance  i)epaitmcnt 


REPORT  ON  EXA/niNATION 


National   Automobile   Underwriters^ 
Conference 


Dated  January  5,   191 7 


ALBANY 
B.  LYON  COMPANY.  PRINTERS 
1917 


^^ 


.v^ 


STATE  OF  NEW  YORK     '        " 

Uneurance  Department 

New  York  Office:  165   Broadway 

New  York,  January  5,  1917 
Jesse  S.  Phillips 

Superintendent  of  Insurance 

Hon.  Jesse  S.  Phielips,  Superuifeiideni  of  Insurance,  Albany, 
Neir  YorJr: 

SiK. —  Au  exaiuiiiatioii  uf  the  Xatioxae  Altomobiee  Under- 
writers' Conference,  as  provided  for  under  section  141  of  the 
Insurance  Law,  has  just  l)een  completed  and  the  report  is  herewith 
submitted. 

IIlSTORV 

Automobile  insurance  was  introduced  into  the  United  States  by 
foreign  Lloyds  about  fifteen  years  ago  and  is  now  being  written 
by  a  large  uund>er  of  nuirine  and  tire  companies. 

On  Decendier  1,  l!)Ot>,  representatives  of  aljout  a  dozen  com- 
panies met  in  jSTcw  A'ork  city  and  formed  the  "  Association  of 
Automobile  Underwriters,"  ado'pting  a  constitution,  rates  and 
policy  forms. 

In  June,  1!)11,  it  was  succeeded  by  the  ''  Automobile  Under- 
writers' Conference  "  which,  together  with  several  affiliated  asso^ 
ciations,  strove  to  regulate  .the  business  of  automobile  insurance 
for  a  five  year  period  ending  about  July,  1916,  when  it  was  merged, 
as  a  local  body,  into  the  "  N'ational  lAiutomobile  Underwriters'  Con- 
ference." In  this  report,  the  acts  and  proceedings  of  the  former 
Automobile  Underwriters'  Conference  are  treated  as  part  of  the 
history  of  the  Xational  Automobile  L'ndenvriters'  Conference  be- 
cause the  aims  and  objects  as  herein  described  are  connnon  to  both 
and  the  histories  of  the  two  organizations  form  one  continuous 
record. 

The  ISTational  Automobile  Underwriters'  Conference  is  an  unin- 
corporated association  of  five  local   "  conferences  "  each  with  a 


9144:6'7 


2 

'"speoi'fic  territoVlal  jurisdiction  indicated  by  its  name.     (See  list 
avtavlied  tii.tiiis  ruport.)    The  five  Local  Conferences  are  as  follows : 

'1.  Eastern  Automobile  Underwriters'   t'onfereiue    (formerly  tlie   "  ATitoino- 
bile  Underwriters'  Conference"). 

2.  The  Western  Automobile  Underwriters'  Conference. 

3.  The  Pacific  Coast  Automobile  Underwriters'  Conference. 

4.  The  New  England  Automobile  Underwriters'  Conference. 

5.  The  Southern  Automobile  Underwriters'  Conference. 

These  local  conferences  are  themselves  nnincorporated  associa- 
tions of  insurance  companies  transacting"  a  general  fire,  marine,  or 
both  fire  and  marine  insurance  business.  Only  through  afliliation 
with  some  one  of  these  local  conferences  in  w^hose  territory  it  does 
business,  can  an  individual  insurance  company  become  a  member 
of  the  National  Conference. 

The  first  meeting  of  the  National  Conference  was  held  August 

24:,  iok;. 

Oegais^izatio^"  and  Objects 

The  purpose  of  the  organization,  as  set  forth  in  the  constitution, 
is  to  •'  promote  and  facilitate  scientific  underwriting  covering  all 
forms  of  insurance  pertaining  to  automobiles." 

It  is  intended : 

(a)  To  serve  as  a  medium  of  excliange  of  information. 

(b)  To  secure  the  ado|)tion  by  underwriters  of  suitable  and  uniform  policy 
forms  and  clauses. 

(c)  To  investigate  class  or  general  hazards  and  ])rocure  and  compile  statis- 
tics concerning  losses  and  tlicir  causes,  with  a  view  to  eliminating  or  reducing 
the  danger  of  tire  and  other  hazards  insured  against  and  to  the  furtherance 
of  intelligent  imdorwriting  by  its  members. 

(d)  To  prevent  rebating  and  unfair  discrimination. 

(e)  To  harmonize  insurable  values,  rates,  methods  of  rating,  commissions 
(including  contingent  commissions),  brokerage,  policy  lorms  and  underwriting 
practices  generally. 

The  ^National  Conference  consists  of  five  delegates  from  each  of 
the  five  Lo<^al  Conferences.  From  these  delegates  the  officei's  of 
the  J^ational  Conference  are  elected,  consisting  of  a  president,  a 
vice-president  and  a  treasurer,  the  present  incumlDeuts  being: 

President Douglas  F.  Cox. 

Vice-President -Tohij  Marshall.  Jr. 

Treasurer Chas.  G.  Smith. 

Secretary L.  G.  Hodgkins. 


3 

The  Conference  carries  on  its  business  through  the  following 
committees: 

1.  Executive  and  Underivriting  Committee,  consisting  of  two 
delegates  froan  each  Local  Conference,  is  charged  with  the  duty  of 
making  rates  and  niles  for  carrying  out  the  general  work  of  the 
Conference;  also,  of  adopting  policy  fonns  and  clauses.  It  can 
thus  call  for  such  reports  from  Local  Conferences  as  it  sees  fit  and 
has  such  general  powers  as  are  necessary  for  the  furtherance  of  the 
objects  of  the  Association.  The  present  membership  of  the  com- 
mittee consists  of: 

H.  F.  Sewall  .• ; Eastern  Conference. 

C.  K,  Yungman Eastern  Conference. 

H.  R.  Cloiigh New  England  Conference. 

W.  R.  Hedge New  England  Conference 

J.  Marshall,  Jr Western  Conference. 

F.  J.  Sauter Western  Conference. 

M.  Dargan Southern  Conference. 

C.  J.  Neare Southern  Conference. 

J.  B.  Levison Pacific  Coast  Conference. 

T.  IT.  Anderson Pacific  Coast  Conference. 

2.  Committee  on  Brol-erage  and  Comntissions,  consisting  of  one 
delegate  from  each  Local  Conference,  has  jurisdiction  over  all 
matters  concerning  the  classifying  and  standardizing  of  commis- 
sions and  brokerage. 

3.  Befcrence  Committee,  composed  of  two  delegates  from  each 
Local  Conference,  possesses  full  power  to  hear  and  determine: 

A.  Difl"erences  between  Local  Conferences  regarding  rates,  commissions  and 
In-okerages,  where  the  question  involves  the  business  methods  and  practices 
in  the  territory  of  two  or  more  Local  Conferences. 

]?..  All  charges  against  Local  Conferences  based  upon  their  obligations  as 
members  of  the  National  Conference  and  their  obedience  in  its  rules,  laws  and 
regulations. 

C.  All  charges  against  company  members  of  Local  Conferences  or  tlieir  olli- 
cers  or  agents,  relating  to  rules  of  the  National  Conference,  or  which  may 
relate  to  acts  or  business  practices  occurring  in  the  territorial  jurisdiction  of 
more  than  one  Local  Conference. 

D.  Any  charge  pending  before  a  Local  Conference  wliicli  by  unanimous  con- 
sent may  be  referred  to  the  National  Conference  Reference  Committee. 

E.  Appeals  from  decisions  made  by  Local  Conferences. 

The  Reference  Committee  is  thus  designed  to  act  as  a  court  to 
hear  and  determine  questions  of  violation  of  the  jSTational  Confer- 
ence rules,  and  to  pass  upon  Ivusiness  methods  and  practices.     Like 


a  federal  tribunal  its  jurisdiction  attaches  when  more  than  one 
local  conference  is  involved,  and  its  activities  are  calculated  to  ad- 
jiist  diiferences  which  local  conferences  cannot  themselves  adjust. 
It  enforces  National  Conference  rules  and  regulations. 

To  enable  this  committee  to  fullill  these  duties,  it  is  given  the 
power  to  examine  all  files  and  records  of  a  local  conference  or  its 
members  and  to  examine,  undei*  oath,  the  officers  and  employees  of 
such  conferenc-e.  And  its  decisions  are  nnide  effective  by  its  power 
to  enforce  proper  penalties,  including  the  imposition  of  fines.  Pro- 
vision is  therefore  nuule  lor  a  deposit  of  $2,500  from  each  Local 
Conference  to  be  held  subject  to  these  fines. 

Local  Coxfeeences 

The  five  Local  Conferences  are  unincorporated  associations  of 
marine  and  fire  insurance  companies,  organized  to  handle  the  local 
problems  arising  in  the  transaction  of  automobile  insurance  busi- 
ness, and  possessing  practically  a  complete  local  autonomy  within 
their  respective  jurisdictions.  All  of  these  Local  Conferences  are 
organized  along  the  same  lines  with  identical  constitutions,  but 
with  individual  sets  of  rules  made  by  themselves  to  meet  their  local 
ne^ds  and  approved  by  the  Xational  Conference.  Membership  is 
open  to  all  duly  api)roved  underwriters  of  automobile  insurance. 

Their  constitutions  provide  for  ofiicers  consisting  of  a  president, 
vice-president  and  secretary-treasurer.  There  is  also  provided  an 
executive  committee  consisting  of  the  three  officers  and  nine  other 
members  elected  by  the  Local  Conference,  having  general  charge 
of  the  business  and  aft'airs  of  the  Conference.  It  audits  accounts, 
levies  assessments,  promulgates  and  enforces  all  rules  with  respect 
to  rates,  commissions  and  agencies,  and  iiiles  generally  relating  to 
the  business  of  automobile  insurance  authorized  or  adopted  by  the 
National  Conference.  It  has  power  to  fix  and  declare  special  rates 
under  niles  of  the  Xational  Conference  and  to  make  rules  cover- 
ing local  conditions  which  are  not  covered  by  any  rule  of  the 
N'atipnal  Conference. 

It  acts  as  a  Grievance  and  Arbitration  Committee  with  full  power 
to  hear  and  determine  all  differences  between  company  members, 
and  all  charges  against  members  with  respect  to  rules  obligatory 


on  members.  xVnd  it  has  concuiTeiit  jurisdiction  with  the  Eefer- 
ence  Committee  of  the  jSTational  Conference,  subject  to  right  of 
appeal  to  that  Committee,  to  hear  and  determine  charges  against 
its  members  relating  to  rates,  policy  forms  and  agents'  commissions 
and  brokerage. 

Like  the  Reference  Committee  of  the  National  Conference,  it 
has  the  power,  through  the  General  Manager  of  the  National 
Board,  to  examine  records  and  files  of  a  member  or  its  agents ;  to 
examine  under  oatli  the  officers,  agents  and  employees  of  its  mem- 
bers, and  to  impose  proper  penalties  and  fines. 

The  company  members  of  the  Local  Conferences,  on  their  part, 
pledge  themselves  to  submit  all  their  disputes,  growing  out  of  the 
rules  of  the  National  Conference,  to  the  Eeference  Committee  of 
the  N'ational  Conference,  and  to  submit  all  disputes,  growing  out 
of  local  rules,  to  the  Executive  Committee  of  the  Local  Conference. 
Each  member  agrees  to  observe  all  provisions  of  the  constitution 
and  rules  of  the  National  Conference  and  its  Local  Conference, 
and  to  carry  out  the  decisions  and  awards  of  the  two  committees. 

Rules 

Local  Conferences  are  permitted  to  promulgate  and  enforce 
their  own  rules  covering  local  conditions  insofar  as  they  do  not 
conflict  Avith  those  of  the  N'ational  Conference.  These  include 
rules  regarding  agents,  granting  of  rebates,  commissions,  conmiit- 
tees,  hearing  and  determining  of  charges  against  members,  etc. 

The  Xational  Conference  in  its  rules  has  established  a  standard 
set  of  definitions  of  agents  as  follows. 

(a)  Department  Manager:  Representative  having  exclusive  authority  over 
more  than  one  state  but  less  than  United  States. 

(b)  ^tate  Agent:  Eepresentative  having  exclusive  authority  over  not  less 
than  one  state. 

(c)  District  Agent:  Representative  who  is  appointed  by  the  company  in 
good  faith  to  supervise  and  have  exclusive  jurisdiction  over  a  territory  less 
than  a  state,  to  whom  all  local  agents  in  that  territory  report. 

(d)  Local  Agent:  Any  local  representative  reporting  to  one  of  the  above, 
or  to  a  Home  Office  or  Branch  Office. 

The  various  local  conferences  (with  the  ap]n-oval  of  the  Xational 
Conference)  have  adopted  various  rules  limiting  the  number  of 


6 

agents  and  establishing  commissions  in  their  respective  territory 
as  follows : 

Eastern  Conference: 

Agents,  maximum  commission 20% 

Brokers,  maximum  commission 15% 

District  Agents,  maximum  commission 25% 

Exceptions:  Cities  of  Buffalo,  Rochester,  Syracuse,  Baltimore,  Philadelphia, 
Pittsburg; 

Agents,  maximum  commission 25% 

Brokers,  maximum  commission 15% 

Xew  York  Metropolitan  District: 

Ag-enfs,  maximum  commission 25% 

Brokers,  maximum  commission 20% 

Philadelphia  and  Pittsburg  ^Metropolitan  District: 

District  Agents,  maximum  commission •      30% 

Neiv  England  Conference: 

Agents,  maximum  commission 20% 

Brokers,  maximum  commission 15% 

Exceptions:  Cities  of  Portland,  Providence,  Bridgeport,  Hartford  and  New 
Haven : 

Ag-ents,  maximum  commission 25% 

Brokers,  maximum  commission 15% 

Boston  and  various  suburbs: 

Agents  and  Brokers,  maximum  commission 20% 

Southern  Conference: 

Agents,  maximum  commission 20% 

Brokers,  maximum  commission 15% 

^\^  est  em  Conference: 

Agents,  niaxinuuii  commission 20% 

Brokers,  iiia.xiiiunii   commission 15% 

Exceptions:  Cities  of  Chicago,  Cleveland,  Cincinnati,  St.  Louis,  Kansas  City, 

^Minneapolis.  Lansing,  Grand  Rapids,  St.   Paul,  Milwaukee,  Detroit, 

Indianapolis,  Omaha,  etc.: 
AgTuts,  maxiiuum  commission 25% 

Pacific  Coast  Conference: 

Agents,  maximum  commission 15% 

Brokers,  maximum  commission 10% 

Exceptions:  San  Francisco,  one  agent  allowed  xmlimited  commission: 

Los  Angeles,  Pasadena.  Oakland.  Salt  Lake  City,  Portland; 

Agents,  maximum  commission 20% 

Brokers,  maximum  commission 15% 

Seattle,  Tacoma: 

Ag-ents,  maximum  commission 25% 

Brokers,  maximum  commission 15% 


FlISrANCIAL 

The  j^ational  Conference  obtains  its  income  by  assessments 
upon  the  five  Local  Conferences,  such  assessment  being  fixed  by  the 
National  Conference.  The  receipts  and  disbursements  since  the 
organization  of  the  JSTational  Conference,  August  24,  1916,  to 
November  10,  1910,  follow: 

Receipts: 

Assessments $14,230  00 

Bank  interest 2  95 

$14,232  95 

Dishiirsements: 

Salaries $2,355  99 

Furniture 512  75 

Rent 333  32 

Printing  and  stationery 373  22 

Postage,  telephone  and  telegraph 100  26 

Traveling  expenses 33  57 

Miscellaneous 63  58 

3,772  69 

Cash  balance $10,460  26 


The  books  of  account  of  the  Conference  consist  of  a  cash  book 
and  an  assessment  book.  While  the  number  of  entries  is  now  small, 
such  records  suffice  for  the  time  being.  But  with  the  increase  in 
the  number  of  items  as  the  Conference  grows,  it  will  be  increas- 
ingly difficult  to  take  oft'  a  financial  statement  unless  the  accounts 
are  properly  classified  in  a  ledger.  Assurances  have  been  re- 
ceived from  the  General  ]\ranager  of  the  Conference  that  such  a 
record  will  be  installed  on  Tannary  1,  1917. 

Affiliations 
Co-operative  relations  are  maintained  between  this  Conference 
and  the  Workmen's  Compensation  Service  Bureau  since  many 
casualty  insurance  companies  write  collision  and  property  damage 
insurance,  which  is  also  written  by  some  of  the  members  of  this 
Conference.  Representatives  of  both  organizations  meet  for  the 
discussion  and  settlement  of  questions  of  mutual  interest,  particu- 
larly that  of  rates.  "Wliile  the  commission  allowances  are  some- 
what different,  the  Conference  follows  the  rates  promulgated  by 


8 

the  Bureau  and  uses  the  same  forms  of  policies  and  endorsements 
covering  this  class  of  business. 

A  statistical  committee  of  the  Compensation  Bureau  has  been 
co-operating  with  the  Conference  in  drawing  up  and  distributing 
forms  for  obtaining  rate  statistics  for  these  lines  of  business. 
Moreover,  the  two  organizations  are  now  working  to  establish  a 
general  information  service  to  aid  the  companies  in  detecting  un- 
desirable risks,  and  thev  co-operate  in  preparing  and  publishing  a 
list  price  manual,  and  a  manual  of  rules  and  rates. 

Policy  Forms  and  Features 

There  are  three  general  policy  forms  used  in  the  writing  of 
automobile  insurance,  as  follows:  1.  Valued  foiins;  2.  Xon-valued 
forms;  3.   Standard  fire  forms. 

The  "  valued  "  and  ''  non-valued  "  forms  have  been  prescribed, 
while  the  use  of  the  "^  standard  fire  "  fonn  has  been  approved  by 
the  l^ational  Conference.  The  "  valued  "  form  is  similar  to  the 
"  non-valued  "  form,  and  is  considered  desirable  because  the  value 
of  the  property  insured  is  fixed  at  the  date  the  policy  is  issued  and 
losses  are  adjusted  according  to  this  value.  It  is  more  in  demand 
for  city  use,  especially  when  it  covers  the  theft  feature,  (considered 
more  hazardous  in  cities),  and  eliminates,  to  a  certain  extent,  any 
controversy  at  the  date  of  loss  as  the  insurance  carried  is  agreed 
to  be  the  value  of  the  car.  This  "  valued  •'  form,  however,  is  pro- 
hibited in  some  territories  where  the  lack  of  inspection  facilities 
may  encourage  the  writing  of  grossly  overvalued  risks.  In  fact, 
some  companies  refuse  to  write  valued  policies  at  all.  And  in 
rural  communities  where  the  theft  hazard  is  a  less  important 
factor,  this  form  is  much  less  used  than  the  "  non-valued  "  form 
with  the  theft  clause  eliminated,  or  the  ''  standard  fire  "  insur- 
ance policy,  both  of  which  are  written  at  a  lower  rate. 

The  "  standard  fire  "  insurance  form  is  sometimes  used  by  fire 
companies,  and  is  written  at  the  same  rates  as  the  "  non-valued  " 
fire  and  transportation  policy.  It  does  not  cover  the  transporta- 
tion hazard,  however,  which  the  other  form  covers. 

The  above  described  forms  are  used  in  providing  different  kinds 
of  coverage  for  private  pleasure  cars,  commercial  trucks  and 
electric  automobiles,  as  follows : 


After  January  1,  1917 
(1)    Valued  (2)    Non-Valued 

Form    A,    covering    Fire,    Theft    and    Form     B,     covering    Fire     Theft     and 
Transportation,  and  containing    an         Transportation. 

automatic   Reinstatement   clause.        Form  C,  covering  Fire  and  Transpor- 
tation. 

The  principal  features  of  the  above  forms  are  briefly  described 
as  follows: 

Fire  : 

Covers  against  loss  or  damage  bv  fire  from  any  cause  whatsoever, 


and  from  lightn 


um. 


Transportation : 

Covers  against  loss  while  being  transported  in  any  conveyance 
by  land  ot  water  through  stranding,  sinking,  collision,  burning,  or 
derailment  of  such  conveyance;  also  against  general  average  and 
salvage  charges  for  which  the  assured  is  legally  liable. 

Theft: 

Covers  loss  or  damage  by  theft,  robbery  or  pilferage,  excepting 
by  any  persons  in  the  assured's  household  or  in  his  employment, 
and  excepting  also  the  wrongful  secretion  by  a  mortgagor  or  vendee 
in  possession  under  mortgage,  conditional  sale,  or  lease  agreement ; 
and  excepting,  in  any  ease,  the  theft  of  tools  and  repair  equipment. 

Rehistatement  Clause: 

This  is  found  only  in  the  "  valued  "  fonus,  and  provides  that 
the  company's  liability  is  reduced  by  any  loss  or  damage,  whether 
covered  by  insurance  or  not,  until  repairs  are  completed,  when  the 
policy  attaches  for  the  original  amount  without  additional  premium 
charge. 

Valued  Clause: 

The  automobile  insured  (body,  machine  and  equipment)  is 
valued  at  the  sum  insured.  In  event  of  loss  or  damage,  adjust- 
ment is  made  on  the  basis  of  the  ao-reed  value. 


10 

Non-Yalued  Clause: 

The  liability  of  the  company  is  fixed  at  the  actual  cash  value  of 
the  property  at  the  time  loss  or  damage  occurs,  such  value  being 
subject  to  proper  depreciation  charge,  and  not  to  exceed  actual  cost 
of  repairing  or  replacing;  provision  is  made  for  appointing  ap- 
praisers, if  necessary,  in  fixing  such  values. 

Exclusions: 

All  of  the  above-described  forms  provide  that  the  company  is 
not  liable  for  loss  or  damage  to 

(a)  Wearing  apparel,  personal  effects  or  extra  bodies,  or  (b) 
Caused  by  invasion,  riot  or  military  power. 

Eiders  and  Endorsements 
The  Conference  provides  for  the  use  of  various  riders  and  en- 
dorsements which  may  limit,  reduce  or  extend  the  coverage,  and 
which  may  therefore  increase  or  decrease  the  premium  charge. 
But  it  has  adopted  no  forms,  riders,  or  endorsements  covering  lia- 
bility arising  from  personal  injuries,  this  class  of  business  known 
as  Liability  insurance  being  written  by  casualty  companies  and  not 
by  fire  or  marine  companies  which  compose  the  membership  of 
this  Conference.  Some  of  the  more  important  riders  used  by  the 
Conference  are  described  as  follows: 

Collision  Clause: 

Covers  damage  sustained  to  the  machine  insured,  by  collision 
with  another  automobile,  vehicle,  or  object,  excluding  damage  to 
tires  (unless  total  damage  to  machine  exceeds  $200),  excluding 
damage  caused  by  striking  any  portion  of  the  roadbed,  or  striking 
rails,  or  ties  of  street,  steam  or  electric  railroads,  and  excluding 
coverage  while  in  any  race  or  speed  contest,  or  while  being  driven 
by  a  minor.    This  clause  is  known  as  the  "  full  coverage  "  clause. 

Another  form  of  collision  rider  is  called  the  "  deductible  average 
clause,"  and  provides  for  the  payment  of  each  claim  in  excess  of 
$25  only. 

Property  Damage : 

This  endorsement  covers  the  amount  for  which  the  assured  may 
become  liable  for  damage  to  property  through  collision   of   as- 


11 

sured's  automobile  with  any  other  aiitoinobile,  vehicle  or  object. 
It  fixes  the  liability  of  the  company  to  value  of  property  destroyed, 
or  cost  to  repair,  and  limits  gross  liabilities  for  any  one  collision  to 
the  amount  stated  in  the  endorsement. 

Fire  Extinguishing  Devices: 

The  assured  agrees  to  carry  at  all  times,  attached  to  the  auto- 
mobile, at  least  one  fire  extinguisher  approved  by  the  Underwriters' 
Laboratory  of  the  National  Board  of  Fire  Underwriters.  A  reduc- 
tion in  premium  is  allowed  under  this  rider. 

Special  Forms: 

Other  forms  may  be  submitted  and  approved  by  the  Executive 
Committee.  Special  forms  are  very  generally  submitted  by  appli- 
cants for  a  special  rate  upon  manufacturers'  risks  and  Ciuite  fre- 
quently upon  taxicab  risks.  These  forms  restrict  and  specify 
exact  coverage,  and  rates  depend  considerably  upon  the  particular 
form  desired. 

Tornado,  Eartliquahe,  Explosion  and  Accidental  and  External 
Discharge  or  Leakage  of  Water: 
An  endorsement  providing  for  this  coverage,  either  in  whole  or 
in  part,  may  now  be  attached  to  the  policy  at  a  rate,  for  the  entire 
coverage,  of  10c.  The  earthquake  and  leakage  features  are  ap- 
parently of  little  actual  value,  but  tornado  coverage  in  certain  sec- 
tions of  the  country  w^here  this  hazard  exists,  appears  to  be  desir- 
able. And  in  these  sections,  the  rate  will  be  much  higher  for  this 
particular  kind  of  coverage.  This  endorsement  goes  into  effect  in 
January,  1917. 

Personal  Effects  Clause: 

After  January,  1917,  the  policy  may  be  extended  to  cover  per- 
sonal effects,  a  specific  amount  being  insured,  at  the  same  rate  as 
charged  on  the  automobile.  However,  theft,  robbery  and  pilferage 
of  such  effects  will  not  be  covered. 

Livery  and  Renting  Endorsemient: 

Upon  payment  of  an  additional  premium  of  one  per  cent.,  an 
endorsement  may  be  attached  to  the  policy,  gTanting  permission 


12 

4o  j:ent,  or  le^^e  tjt  tt?^  tire  aiilomubile  coTered,  ^t  carrving  jDas- 
sengers  for  compensation,  on  condition  that  the  anioimt  of  insur- 
ance is  reduced  at  the  rate  of  two  and  one-half  per  cent,  a  month. 

European  Privilege  Clause: 

In  consideration  of  one-half  per  cent,  additional  premium,  the 
policy  may  be  extended  to  cover  the  automobiles  while  in  Great 
Britain  or  Continent  of  Europe;  also  while  being  transported  by 
land  or  water  within  these  limits  including  the  risk  of  one  trip  by 
regular  line  steamer  under  certain  fixed  conditions. 

Dealers'  Open  Policy  Rider: 

Creates  a  special  form  of  policy  applicable  to  dealers  only.  It 
covers  alj  automobiles,  bodies,  chassis,  tops  or  other  equipment 
o^^^led  by  assured  and  held  for  sale  from  time  delivered  to  him  and 
until  delivered  to  purchaser,  renewable  annually. 

Rates  ix  Effect  Befoee  Jaxuary  1,  1917 
Fire,  Transportation  and  Theft 

Since  the  organization  of  the  various  automobile  conferences, 
several  schedules  of  rates  have  been  promulgated,  such  schedules 
having  been  modified  and  revised  to  meet  changing  conditions  of 
the  automobile  business.  The  more  important  elements  contribut- 
ing to  these  changes  have  been  the  different  classes  of  automobiles 
(namely,  pleasure,  commercial,  dealers,  manufacturers,  taxicabs, 
etc. )  and  the  change  in  the  price  of  cars. 

The  revisions  in  the  rates  have  in  the  main,  shown  a  tendency 
to  increase  the  rates  on  lower-priced  cars,  and  decrease  the  rates  on 
higher-priced  cars  —  a  tendency  based  on  the  theory  that  the 
cheaper  the  car,  the  poorer  the  construction  —  thus  increasing  the 
physicial  hazard  —  and  the  less  care  it  receives,  thus  increasing 
the  moral  hazard. 

The  regular  schedule  of  rates  now  in  use  for  the  Eastern  Con- 
ference, became  effective  January  1,  1916,  and  will  be  in  force 
up  to  January  1,  1917.    They  are  as  follows : 


13 


Bates  for  Full  Form  and  Restricted  Form  of  Policy  Gasoline  and 
Steam  Pleasure  and  Commercial  Type  Cars 


Original  list  price  of  automobile  when 
new,  excluding  cost  of  additional 
equipment  and  extra  bodies. 


Class  A, 
S3 , 500 
and  up 


Class  B, 
$2,100 


Class  C, 

$1,200 


Class  D, 
$700 


Class  E, 

$699 
and  under 


This  year  and  next 
year  models. 


Last  year  models. 


Year     before     last 
models. 


Three     years     old 
models. 


Insure  for  Not  to  Exceed  Actual  Cost 


Full  form  .  . 
Restricted  form 


Full  form .  . 
Restricted  form 


$1   50 
1  00 


Amount 
of  insur- 
ance at 
option  of 
company 


Amount 
of  insur- 
ance at 
option  of 
company 


Full  form .  . 
Restricted  form 


/   Full  form 

\   Restricted  form 


Full  form  .  . 
Restricted  form 


$2  25 
1   75 


Amount 
of  insur- 
ance at 
option  of 
company 


$3  25 
2  75 


Amount 
of  insur- 
ance at 
option  of 
company 


$5  00 
4  50 


$1   75 
1  00 


$1  75 
1  00 


$2  00 
1  00 


$2  00 
1  00 


Insure  for  Not  More  Th.\n 


80%  of 
original 
price 


70%  of 

original 

price 


$2  50 
1  75 


60%  of 

original 

price 


$2  75 
1  75 


60%  of 

original 

price 


$3  00 
2  00 


Insure  for  Not  More  Th.\n 


50%,  of 

original 

price 


$3  00 
2  25 


50%  of 

original 

price 


$3  25 
2  50 


40%  of 

original 

price 


$3  75 
2  75 


40%.  of 

original 

price 


$4  00 
3  00 


Insure  for  Not  More  Than 


40%,  of 

original 

price 


40%  of 

original 

price 


$4  25 
3  50 


30%  of 

original 

price 


$4  75 
3  75 


30%  of 

original 

price 


$5  00 
4  00 


Insure  for  Not  More  Than 


30%  of 

original 

price 


$5  25 
4  50 


30%  of 

original 

price 


30%  of 

original 

price 


30%  of 

original 

price 


$6  00 
5  00 


Full  form  covering  fire,  theft  and  transportation — minimum  premium  $10.00. 
Restricted  form,  same  as  full  form,  with  endorsement  attached  eliminating  theft  and  valued 
feature. 

Note. — Above  rates  are  for  $25.00  deductible  feature  in  theft  policies. 

There  is  a  separate  schedule  of  rates  for  Electric  Automobiles, 
ranging  from  one  aiid  one-fourth  per  cent,  for  this  and  next  jear 
models,  to  two  and  one-fourth  per  cent,  for  older  than  three-year 
models,  a  reduction  of  one-fourth  per  cent,  being  allowed  for  the 
restricted  form. 

There  is  also  a  schedule  for  Dealers'  Automobiles  ranging  from 
two  and  one-fourth  per  cent,  for  the  highest  price  cars  to  U\o  and 
three^fourths  per  cent,  for  the  lowest. 


14 

All  of  these  rates  are  annual  rates.  As  shown  above,  the  sched- 
ule divides  automobiles  into  five  classes  according  to  list  price,  the 
divisions  between  classes  being  arbitraiy  and  apparently  having 
contemplated  gi-ouping  cars  according  to  the  make.  Each  of  these 
classes  is  sub-divided  into  five  divisions  by  age  of  car,  and  the 
amount  of  insurance  indicated  for  each  price  classification  and  age 
classification.  The  older  the  car,  the  smaller  the  percentage  of 
its  value  can  be  insured.  Models  of  current  year  and  next  year 
may  be  insured  for  any  amount  not  exceeding  actual  cost;  cars 
valued  at  $3,500  and  up  (Class  A  cars)  may  carry  any  amount  of 
insurance  regardless  of  age,  (not  exceeding  actual  cost,  of 
course).  Ijut  limitation  is  placed  upon  the  amount  of  insurance 
which  may  be  written  on  cars  of  last  year's  model  and  older,  falling 
under  all  other  price  classes,  such  limitation  varying  under  the 
different  classes  and  ages  of  models. 

Xone  of  these  rates  were  based  upon  statistics  gathered  for  the 
purpose,  although  the  experience  of  individual  companies  w^as 
used.  And  there  are  no  records  or  statistics  in  the  files  of  the  Con- 
ference which  would  indicate  whether  these  rates  were  equitable 
or  just. 

A  special  form  of  policy  is  used  covering  Dealers'  Automobiles, 
furnishing  coverage  from  the  time  the  dealer  obtains  the  car  until 
he  disposes  of  it.  The  rates  indicated  above,  for  this  form  of 
policy,  are  slightly  highei-  than  the  average  rates  shown  in  the 
regular  schedule.  However,  pro  rata  cancellation  at  the  request 
of  the  assured  is  pennitted,  instead  of  applying  the  customary 
short  rates  under  such  circumstances.  And  when  the  initial 
premium  on  any  dealers'  risk  amounts  to  at  least  $500,  such  risk 
may  be  specially  rated  and  written  upon  a  special  policy  form. 

Speciat.  Rates  on  Commercial  Fleets 
In  cases  where  insurance  of  $15,000  or  more  is  desired  on  a 
number  of  commercial  cars  (called  a  commercial  fleet),  a  special 
rate  may  be  allowed  in  the  Eastern  Conference  as  per  the  follow- 
ing schedule : 

Commercial  Car  Schedule 
Commercial  cars  for  this  special  schedule  are  classified  accord- 
ing to  business  in  which  such  cars  are  employed,  as  follows : 


15 

Class  1.  Wholesale  delivery  and  transportation  of  heavy  merchandise. 
Class  2.  Retail  delivery  and  transportation  of  light  merchandise. 
Class  3.  Express  wagons,   mail   wagons,    moving   vans,    and    cars   engaged    as 
common  carriers  or  in  the  carrying  of  goods  of  others  for  hire. 

Group  A  —  Gasoline  Cars,  $2,500  and  Over  (Chassis  Price)  : 
On  cars  of  model  not  more  than  two  years  older  than  current 

year  (i.  e.  1914,  1915,  1916  and  1917  models  in  calendar  year 

1916),  charge  following  rates: 

Road    Bate  Inside  Rate 

Class   1 56  2/3  tariff  fire  rate 

Class  2 90  1/2  tariff  fire  rate 

Class  3   1 .25  1/3  tariff  fire  rate 

On  cars  of  model  more  than  two  years  old   (1913  and  older  in  calendar  year 

1916)  add  15%  of  above  road  rate  for  each  additional  year  of  age. 

Group  B  —  Gasoline  Cars  Under  $2,500  (Chassis  Price) : 

On  cars  of  model  not  more  than  one  year  older  than  current 
year  (i.  e.  1915,  1916  and  1917  mod,els  in  calendar  year  1916), 
charge  the  following  rates : 

Road    Rate  Inside  Rate 

Class  1 75  2/3  tariff  fire  rate 

Class  2 1 .20  1/2  tariff  fire   rate 

Class  3 1 .65  1/3   tariff  fire  rate 

On  cars  of  model  more  than  one  year  old  (1914  and  okler  in  calendar  year 
1916)   add  15%  of  above  road  rate  for  each  additional  year  of  age. 

Group  C  —  All  Electrics: 

Road   Rate  Inside  Rate 

Class  1 42  2/3   tariff  fire  rate 

Class  2 69  1/2   tariff  fire   rate 

Class  3 86  1/3  tariff  fire  rate 

The  amount  of  insurance  is  left  to  the  discretion  of  the  underwriters. 
Allowance  for  fire  only  form   (commercial  trucks)  : 

This  and  next  year's  cars,  1  ton  and  over 10c 

All  other  cars    5c 

Amendments  to  Schedules  for  Eating  Automobiles  of  the  Private 
Pleasure  Type  in  Connection  with  Schedules  of  Automobile 

Trucl'S  Belonging  to  Public  Service  Corporations 
Where  all  property  covered  is  housed  in  buildings  of  approved 
fireproof  construction  and  equipped  with  an  approved  system  of 
automatic  sprinkler,  the  following  schedule  may  be  used: 

1.  Fifty  per  cent,  of  rate  shown  on  Rate  Sheet  for  Private  Pleasure  Type  of 
Vehicles. 


16 

2.  Seventy-five  per  cent,  of  firie  rate  on  contents  of  garage  where  habitually 

housed. 

3.  Twenty  per  cent,  of  rate  under  Xo.  1  if  allowance  has  l)een  made  in  rate 

under  No.  2  for  superior  construction  or  protection. 

4.  Ten  per  cent,  deduction  for  approved  repair  shop. 

The  above  rates  are  annual  and  provide  fnll  coverage.  An 
analysis  of  the  schednle  shows  that  the  cars  are  divided  into  three 
main  business  classifications,  each  of  which  is  sub-divided  into 
electric  and  gasoline  cars  —  the  gasoline  cars  being  further  shown 
in  two  groups,  one  including  cars  listing  at  $2,500  or  over,  and 
the  other  group  including  cars  costing  less  than  $2,500. 

The  three  elements  affecting  the  rate  under  this  schedule  are  the 
class,  cost  and  age  of  car.  The  basis  of  the  rate  is  subi-divided 
into  a  road  rate  (that  is  while  actually  in  service)  and  the  inside 
rate  (that  is  while  stored  in  the  garage).  There  are  no  records  or 
statistics  bearing  out  the  road  rate  factor.  The  inside  rate  is 
based  upon  the  actual  fire  rate  applying  to  the  garage  where  the 
cars  are  housed,  a  percentage  of  such  fire  rate  being  specified  for 
each  class  of  cars,  such  percentage  being  based  upon  the  theory 
that  Class  1  cars  are  housed  twoi-thirds  of  the  time  and  therefore 
are  rated  at  two-thirds  of  the  tariff  fire  rate,  that  Class  2  cars  are 
housed  one^half  of  the  time  and  therefore  are  rated  at  one-half  of 
the  fire  tariff  rate,  etc. 

The  rates  shown  in  this  special  schedule  are  generally  lower 
than  the  commercial  car  rates  shown  in  the  regular  commercial  and 
pleasure  car  schedule  previously  shown.  Since  the  tariff  fire  rate 
affects  the  ultimate  rate  on  this  class  of  cars,  the  lower  or  higher 
such  fire  rate  is,  the  lower  or  higher  the  commercial  car  rate  will  be. 
In  fact,  it  is  possible  that  the  fire  rate  may  be  so  high  that  the  re- 
sulting premium  is  greater,  based  upon  this  special  schedule,  than 
it  would  be,  based  upou  the  regular  schedule  which  is  not  affected 
by  any  fluctuation  in  the  fire  rate. 

At  this  date,  therefore,  there  exist  two  schedules  under  which 
commercial  car  fleets  may  be  rated  —  the  regailar  schedule  for 
"  Gasoline  and  Steam  Pleasure  and  Commercial  Type  Cars,"  and 
the  special  ''  Commercial  Car  Fleet "  schedule.  There  is  no  close 
relation  between  the  two  schedules,  and  any  single  fleet  figured 
upon  the  two  schedules  will  result  in  different  rates.     This  may 


17 

result  in  a  possible  violation  of  the  provisions  of  section  141  of 
tlie  Insurance  Law,  provided  some  fleet  is  rated  under  the  regular 
schedule,  which  may  com23ly  with  all  specifications  and  require- 
ments necessarv  to  be  rated  under  the  special  fleet  schedule.  In 
such  an  instance,  two  risks  of  "  essentially  the  same  hazards  and 
having  substantially  the  same  degree  of  protection  against  fire  " 
would  be  difl^erently  rated,  and  would  result  in  "  unfair  discrim- 
ination." 

A  further  possible  ''  unfair  discrimination  "  results  from  the 
limitation  of  the  application  of  the  "  commercial  fleet "  schedule 
to  fleets,  the  insurance  upon  which  shall  aggregate  at  least  $15,000. 
While  it  may  be  possible  that  fleets  upon  which  the  insurance 
would  amount  to  $15,000  or  more  receive  better  care  and  are 
better  housed  than  smaller  fleets,  the  actual  diiference  in  the  hazard 
has  no  eftect  upon  the  application  of  this  schedule,  the  amount  of 
insurance  carried  being  the  only  factor  absolutely  permitting  the 
application  of  this  schedule.  This  is  an  apparent  violation  of  sec- 
tion 141,  since  it  results  in  an  unfair  discrimination  between  risks 
of  essentially  the  same  hazard, -in  that  fleets,  the  insurance  upon 
which  amounts  to  less  than  $15,000,  are  rated  higher  than  fleets 
insured  for  $15,000  or  more,  although  practically  no  difference  in 
hazards  may  exist. 

In  the  application  for  a  special  rate  upon  any  commercial  car 
fleet,  the  statement  is  required  that  the  insurance  desired  is  upon 
all  commercial  cars  owned  by  the  applicant  in  any  given  location 
and  district,  and  the  use  of  this  special  schedule  is  not  contem- 
plated unless  all  such  cars  are  included  in  the  coverage.  The  sched- 
ule is  not  applied  to  a  portion  of  a  fleet,  even  though  the  insurance 
on  such  portion  would  amount  to  $15,000  or  more.  This  condition 
may  be  a  violation  of  section  141  of  the  Insurance  Law,  one  of 
whose  provisions  is  that  no  association  shall  fix  or  make  any 
schedule  of  rates  which  is  to,  or  may  apply  to  any  risk  within  this 
State  on  the  condition  that  the  whole  amount  of  insurance  on  such 
risk  shall  be  placed  at  such  rates. 

Special  Rates  on  Manufactukers'  Cars  and  Taxicabs 
At  the  present  time,  each  Local  Conference,  according  to  its  own 
rules,  permits  the  fixing  of  special  rates  and  the  approval  of  special 


18 

forms  of  policies  on  si^ecific  risks  on  cars  owTied  by  automobile 
manufacturers,  and  on  taxicabs  where  one  individual,  finn  or 
corporation  owns  or  operates  a  certain  mininuim  number  of  such 
taxicabs.  A  special  committee,  one  of  whose  members  is  generally 
the  applicant,  is  appointed  to  consider  every  individual  application, 
which  committee  recommends  a  rate  and  policy  fonn  covering  the 
particular  risk.  Such  rate  and  form  is  thereafter  bulletined  to  all 
interested  members. 

The  rates  upon  manufacturers'  cars  are  generally  based  upon 
the  expected  annual  output  af  the  factories,  nimiber  of  cars  stored 
in  any  one  locality  and  length  of  time  they  remain  in  the  manu- 
facturers' possession.  The  main  elements  affecting  such  rates  are 
the  prevailing  fire  rates  on  the  premises  where  cars  are  stored,  the 
amount  at  hazard  in  any  one  particular  place,  valuation  placed  on 
each  car,  and  theft  coverage  or  elimination.  Since  the  policy  form 
demanded  on  the  various  manufacturers'  risks  differ  considerably 
in  their  conditions,  the  rate  applicable  to  any  one  form  is  dependent 
to  a  large  extent  upon  the  underwriters'  judginent,  there  being 
practically  no  experience  covering  any  one  fonn  of  policy,  and, 
consequently,  no  rate  or  policy  necessarily  bears  any  fixed  relation 
to  another  rate  or  policy. 

Special  rates  covering  taxicabs  (and  applying  likewise  to  livery 
cars,  busses,  etc.)  are  made  up  by  the  Local  Conferences  in  the 
same  manner  as  manufacturers'  rates.  The  general  rules  recom- 
mended a  rate  (for  the  Eastern  Conference)  of  not  less  than  two 
and  one-half  per  cent,  on  taxicabs,  but  provided  for  a  special  rate 
where  a  single  individual,  firm  or  corporation  owns  or  operates 
more  than  twenty  such  vehicles.  There  is  no  fixed  methotl  of  ar- 
riving at  these  special  rates,  but  they  are  presumably  more  or  less 
affected  by  the  list  prices  of  each  car,  make  and  condition,  disci- 
pline of  employees,  limit  of  liability  for  any  one  loss,  and  any 
previous  underwriting  experience  of  the  risk.  The  greatest  effect, 
however,  results  from  the  road  rate,  the  extent  to  which  used  on 
the  road,  and  the  age  of  the  machine.  In  some  instances,  taxicabs 
are  insured  as  contents,  under  the  regular  fire  policy  covering  the 
building  where  they  are  stored,  no  coverage  being  carried  upon 
the  road  risk.  In  that  event,  the  rates  are  the  regular  fire  rates 
over  which  the  Conference  has  no  supervision. 


19 

While  the  files  of  the  Eastern  Conference  show  the  details  and 
conditions,  fire  rates,  etc.,  pertaining  to  each  special  rate,  there  is 
no  fixed  method  of  working"  out  such  special  rate  and  the  records 
do  not  reveal  to  what  extent  the  diiferent  factors  may  have  affected 
the  rate.  It  would  appear  that  the  judgment  of  the  special  rate 
committee  has  a  great  effect  upon  these  special  rates,  and  as  all 
these  rates  are  not  devised  by  the  same  conmiittee,  there  can  he  no 
a;bsolute  uniformity  in  the  resultant  rates. 

There  is  an  apparent  violation  of  section  141  of  the  Insurance 
Law,  due  to  the  restriction  of  these  special  taxicab  rates  to  risks 
covering  more  than  twenty  cars.  Application  for  such  rates  involv- 
ing less  than  twenty  cars  have  been  made  but  rates  refused  for  that 
reason.  The  law  prohibits  any  unfair  discrimination  between 
risks  of  essentially  the  same  hazard.  The  hazard  of  the  risk  does 
not  affect  the  eligibility  for  these  special  rates,  the  only  condition 
imposed  being  in  regard  to  the  number  of  machines  to  l>e  covered. 

Attention  to  this  apparent  discrimination  was  called  in  the  re- 
port upon  the  Automobile  Underwriters'  Conference  dated  Decem- 
ber 30,  1911,  and  while  the  Conference  recognized  this  condition, 
as  indicated  in  the  report  of  the  Executive  Committee  to  the  Con- 
ference, dated  Febniary  28,  1912,  and  therein  recommended  some 
provision  be  made  to  uniformly  rate  risks  of  the  same  class  and 
hazard,  no  action  was  then  taken  to  remedy  this  condition. 

At  a  subsequent  date,  December  11,  1915,  attention  was  again 
directed  to  this  matter,  and  to  the  possibility  of  unfair  discrimina- 
tion occurring  in  the  rating  of  commercial  fleets  upon  the  two  dif- 
ferent schedules,  namely,  the  regular  "  pleasure  and  commercial 
car  "  schedule  and  the  special  "  conuuercial  car  fleet  "  schedule,  as 
explained  before  —  together  with  the  possible  violation  of  the  law 
in  the  restriction  of  the  application  of  this  special  "  commercial 
car  fleet "  schedule  to  fleets  whose  insurance  must  aggregate 
$15,000.  Attention  was  also  directed  to  the  possible  violation  of 
the  law  in  requiring  all  cars  of  any  fleet  to  be  insured  in  order  to 
secure  the  special  rate,  the  law  not  pennitting  the  making  of  a  rate 
conditioned  on  the  placing  of  all  the  insurance  at  such  rate. 

To  investigate  these  criticisms,  a  "  Special  Rate  ' ■  Committee 
was  appointed  by  the  President  of  the  Xational  Automobile  Con- 
ference which  made  a  report  at  the  ann\ial  meeting  of  the  Confer- 


20 

ence  November  16,  1916,  whereby  it  iinanimouslj  recommended 
that  the  Conference  discontinue  its  present  method  of  special 
rating,  and  use  instead  certain  class  rates  for  these  various  risks. 

l^othing  came  of  this  effort,  however,  as  the  recommendations 
of  the  Committee  were  not  adopted.  The  possibilities  of  the  viola- 
tions of  section  141,  therefore,  still  exist  and  nothing  has  been  done 
to  this  date  to  remove  such  apparent  discriminations. 

Eates  in  Force  After  January  1,  1917 
One  of  the  objects  sought  in  the  organization  of  a  national  con- 
ference like  this  was  the  establishment  of  fair,  adequate  and  scien- 
tific rates.  As  hereinbefore  stated,  there  are  no  general  conference 
statistics  in  existence  as  a  basis  for  such  rates,  although  steps  are 
being  taken  to  remedy  this  situation.  The  Conference,  however, 
considered  it  necessary  to  revise  the  regular  rates  so  that  they 
would  reflect  more  adequately  the  individual  experience  of  the 
company  members.  And  this  revision  was  made  to  take  effect 
January  1,  1917,  along  the  lines  hereinbefore  indicated  —  a  de- 
crease in  the  rates  on  the  more  expensive  cars,  and  an  increase  in 
rates  on  lower  priced  cars. 

A  new  commercial  truck  scJiedule  was  adopted,  thus  separating 
it  from  the  private  pleasure  car  schedule. 
The  schedules  follow : 


21 


T.    C 

02 


GS 


w    bC 


^03 
O.S 
CD   M 


IM        —li-i 


c  a 


gg 


■*05 


10       (Nt^ 


I 


ro'S 
"E 

8    12s 

a 

SI 

^    -" 

«  °  c 
c  H  c  S 
3  3  o  n 


iill 

£  3  aS 


St5 


£"2 


3  i 


■5« 


£  >  C  > 


■5  I 


o  £  o 


=  00  c 


^5 


■  -  X  c 

J=  — -r 
h  r.  a 


I  q  3 


■5        I 


5^ 


22 

These  rates  provide  full  theft  coverage,  thereby  eliminating  the 
$25  deductible  feature  (whereby  $25  is  deducted  from  each  and 
every  loss).     The  minimum  premium  is  abolished. 

A  comparison  of  this  new  Private  Pleasure  Car  Schedule  with 
the  one  now  in  force,  shows  that  the  classifications  of  the  list 
prices  of  cars  have  been  changed.  Class  E,  instead  of  including 
cars  listed  at  $699  and  under,  now  comprises  cars  costing  $799 
and  under;  Class  D,  previously  headed  $700  to  $1,199,  now  reads 
$800  to  $1,399 ;  Class  C,  formerly  $1,200  to  $2,099,  now  reads 
$1,400  to  $2,499 ;  Class  B,  previously  $2,100  to  $3,499,  now  reads 
$2,500  to  $3,499;  'Class  A  containing  the  highest  price  cars,  re- 
mains unchanged. 

Moreover,  the  rates  for  the  three  lowest  price  classifications  have 
been  increased  so  that  cars  of  this  year's  model,  valued  between 
$1,400  and  $2,499,  which  had  previously  taken  a  rate  of  $1.75, 
will  now  rate  at  $2 ;  cars  valued  between  $800  and  $1,399,  previ- 
ously $2,  will  now  be  $2.75  and  cars  classified  at  $799  and  under, 
the  lowest  priced,  and  hence  most  widely  used  cars,  formerly  rated 
at  $2,  will  now  have  to  pay  $3.75.  The  increases  affect  most  of  the 
models. 

The  rates,  how^ever,  on  the  two  classes  of  higher  priced  cars, 
have  been  decreased  for  the  older  models,  so  that  a  three  year  old 
model  valued  at  $3,500  and  up,  and  formerly  rated  at  $3.25,  will 
now  be  rated  at  $2.75,  and  three  year  old  Class  B  cars  decreased 
from  $4  to  $3.50. 

Another  factor  tending  to  increase  still  further  the  rates  on  the 
lower  priced  cars,  is  the  change  in  the  list  price  classification  men- 
tioned above.  The  result  of  this  change  is  approximately  as 
follows : 

1.  Three  of  the  lowest  price  pleasure  type  models  previously 
classified  in  the  $700  to  $1,199  classification,  and  rated  at  $2  for 
full  coverage,  would  have  been  increased  to  $2.75  if  they  had  re- 
mained in  their  old  price  classification ;  but  on  account  of  being 
shifted  to  the  low^est  classification  ($799  and  under),  Avill  now  be 
rated  at  $3.75  —  a  change  from  $2  to  $3.75. 

2.  In  the  former  $1,200  to  $2,099  classification  were  forty-two 
models  of  various  pleasure  type  cars.  In  addition  to  the  increase 
in  the  rate  on  these  models  from  $1.75  for  full  coverage,  to  $2, 


fourteen  of  the  lowest  priced  and  most  widely  used  of  these  models, 
by  being  shifted  to  the  next  lower  price  classification  ($800  to 
$1,399),  will  now  be  rated  at  $:2.75  or  a  change  in  rate  from  $1.75 
to  $2.Y5. 

3.  In  the  fonner  $2,100  to  $3,499  classification,  were  thirty 
models.  Without  any  change  in  ]3rice  classification,  these  would 
have  taken  the  same  rates  as  before  —  namely  $1.75  for  full  cover- 
age on  new  models.  Kine  of  these  models,  however,  will  now  be 
rated  up  to  $2. 

The  changes  in  the  above  schedule  as  heretofore,  are  not  sup- 
ported by  any  general  statistics  in  the  possession  of  the  K'ational 
Conference  but  only  by  experience  of  individual  companies. 

Theft  Losses  —  Pleasuke  Caes 

According  to  the  Manager  of  the  Conference,  the  individual  ex- 
perience of  the  companies  has  shown  an  unusually  high  loss  ratio 
for  theft  coverage  on  cheaper  pleasvire  cars.  It  is  asserted  that 
such  cars,  because  of  their  uniform  construction  and  appearance, 
with  the  consequent  lack  of  distinguishing  features,  are  almost 
impossible  to  recover  when  stolen,  and  are  easily  disposed  of  by 
thieves.  The  Conference  has  attempted  to  reflect  this  individual 
experience  in  the  new  rates,  since  they  make  the  theft  coverage  the 
most  expensive  feature  of  the  policy  —  at  least  in  the  lower  price 
classifications  of  the  newer  models.  For  example,  in  Class  E 
($799  and  under),  a  charge  of  $1  is  indicated  for  fire  and  trans- 
portation, while  the  addition  of  theft  coverage  increases  the  rate  to 
$3.50. 

In  Class  D  ($800  to  $1,399),  addition  of  theft  coverage  in- 
creases the  rate  from  $1  to  $2.50. 

In  Class  C  ($1,400  to  $2,499),  from  $1  to  $1.75. 

In  Class  B  ($2,500  to  $3,499),  from  $1  to  $1.50. 

In  Class  A  ($3,500  and  up),  from  $1  to  $1.25. 

The  theft  hazard,  according  to  the  General  Manager  of  the  Con- 
ference, is  becoming  so  serious  that  in  addition  to  various  steps 
taken  by  the  companies  to  aid  in  recovering  stolen  cars,  the  Confer- 
ence is  considering  the  allowance  of  certain  rate  reductions  to  en- 
courage the  use  by  the  assured,  of  standard  and  approved  auto- 


24 


mobile  locking  devices  as  a  protection  against  theft.  In  fact,  it 
has  been  proposed  to  allow  fifteen  per  cent,  of  the  theft  premium 
for  the  installation  of  a  locking  device  approved  by  the  Under- 
writers' Laboratories,  which  proposal  will  doubtless  be  adopted  by 
the  jSTational  Conference. 

The  following  schedule  shows  the  charges  made  for  theft  cover- 
age, Avhich  are  already  included  in  the  Private  Pleasure  Car 
Schedule  previously  shown,  but  are  here  separated  for  better 
analysis : 

PLEASURE  VEHICLES—  (THEFT  ONLY) 
After  January  1,  1917. 


List  price  of  vehicles 

Class  A, 
$3 , 500 
and  up 

Class  B, 
S2,500 

to 
$3,499 

Class  C, 
$1,400 

to 
$2,499 

Class  D, 

$800 

to 

$1,399 

Class  E. 

$799 

and  under 

This  and  next  year's  models. 

$0  25 
25 
25 
25 
25 

$0  50 
50 
50 
50 
50 

$0  75 

50 
50 
50 

$1   50 
1  25 
1  00 

75 

82  50 

This  and  last  year's  models 

2  00 
1  00 

Three  vear  old  models 

75 

75 

An  analysis  of  these  charges  shows  that  the  rates  are  highest  for 
the  cheaper  models  (indicating  the  greater  theft  hazard),  and  de- 
crease as  the  car  gi'ows  older.  Apparently  the  hazard  is  con- 
sidered less  for  the  older  than  the  newer  cars.  In  the  case  of 
higher  priced  cars,  the  theft  hazard  is  comparatively  small,  (owing, 
it  is  stated,  to  the  constant  use  of  private  chauffeurs),  and  is  prac- 
tically the  same  regardless  of  the  age  of  the  car. 


Fire  Losses  —  Pleasure  Cars 

The  fire  experience,  for  all  models  and  classes  of  cars,  has  been 
uniformly  good,  according  to  the  Manager  and  the  rates  for  this 
coverage  have  been  kept  the  same  for  the  cheaper  models  and  have 
even  been  decreased  for  the  higher  priced  cars. 

It  will  be  noticed  that  in  cars  of  "  this  and  next  year's  models," 
a  uniform  fire  rate  of  $1,  regardless  of  value  of  car,  was  in  force  in 
the  previous  schedule  and  is  still  retained  in  the  new  schedule.  This 
rate  increases  with  the  increasing  age  of  the  car.  It  will  also  be 
noticed  that  the  fire  rates  are  higher  for  the  cheaper  models  than 


25 


for  the  higher  priced  cars  —  due,  it  is  claimed,  tO'  the  greater  fire 
•hazard  from  cheaper  engines.  The  differential  between  the  valued 
and  non-valued  forms  of  policies  is  25  cents,  regardless  of  price  or 
age  of  car. 

Commercial  Truck  Eates 
Under  the  new  schedule  of  rates  effective  after  January  1,  1917, 
the  Commercial  Truck  rates  which  were  formerly  included  with 
Pleasure  Car  rates,  will  henceforth  be  promulgated  in  a  separate 
schedule,  as  follows: 


26 


Cj 


fe 

§te-s 

§ 

8^2 

' 

g 

8KS 

? 

0 

8{2S 

'1 

g 

8S8 

s-"- 

•=•& 

cgc.^ 

•o'R 

S"^ 

^ 

•o'^ 

0^^ 

^ 

■o-a 

go^ 

s§-| 

S5-3 

^■3 

65-3 

O^ 

3-a 

5:1 

°:l 

^ 

z 

i 

z 

o 

o 

Z 

z 
< 

0 

i 

•ol 

8^^ 

g 

ol 

■ol 

t2g^ 

■o'E 

gS2 

10  ou; 

o 

a 

>5S 

s 

£S-3 

£?-3 

^■3 

^o 

fa 

0 

iz 

0 

1 

s§5 

c 

|z 

g| 

b: 
o 

-  s 

z 

o.S 

'1 

1 

-      g 
Z 

§1 

a 
1 

Z 

g:| 

1 

2 

§s:f: 

«; 

S8§ 

g 

S8g 

,0 

?,g§ 

08 

n 

S'^^ 

1 

*3a 

8^- 

g 

■oi 

WMfN 

1 

"ol 

S^^ 

''  a 

e4 

o 
z 

a 

i 

11 

3 

i 

a 

3 

5 

b, 

KS? 

o 

° 

° 

1 

1 

~^ 

S8g 

g 

8SS 

g 

K§5 

g 

gS2 

12 

0 

e#     '' 

-c'i 

99        " 

•o^ 

g^" 

■o'E 

gcc. 

-oK 

g^^ 

^1 

£5-3 

£5-3 

£§"3 

eg 

O 

s 

< 

^ 

1 
1 

°;| 

«<% 

5 

o 

0 

1 

0 

1 

0 

a 

SS 

"B^->> 

Kg;? 

°^ 

'o| 

S8S 

1         ^ 

8Kg 

ftl 

K§;s 

i^ 

|iil 

e©     " 

ol 

«l» 

3§i| 

«« 

lilt 

^ 

Oo 

£  3  ao 

IJ 

11 

iii§ 

Ij&g 

n 

d 

: 

c 

e 

C 

c 

o 

^0 

s 

c5 

d^ 

c5 

C.2 

dJ  : 

•5 

i 

IH 

O  fc.  c 

til 

°  o  = 

III 

III 

I 

i^i 

pJ 

c-3  ; 

1^1 

i^t 

1 

Hi 

T)£  ■" 

1^^ 

is  a  g 

a  o)t3 

C  Ot3 

C  a  — 

C    <D-rt 

C  o~3 

•o 

^5| 

^^1 

ciX  c 

^^1 

oSJ2   - 

S 

•Soo; 

•Sua) 

"S  o"  a) 

5££ 

:S£c£ 

:S££ 

ill 

a 

si^'S 

g-g-S 

£■31 

£"S1 

o-g-g 

"3 

«^j 

III 

«^^ 

«^^ 

«^3 

•3 

■S?? 

-s?? 

■s>> 

"g>> 

X 

^ci 

^  C  H 

^ifi 

^ii 

^ii 

C3  O   O 

^  O  O 

"3  o  o 

■300 

"3  0  0 

& 

>2Z 

>ZZ 

>ZZ 

>zz 

>zz 

1 

-^=^ 

-^cifi 

^oi.-^ 

^^i« 

^^ici 

S 

^ 

s 

fe 

is 

T) 

2 

i 

-o 

■§ 

.2 

O 

73 
■0 

05 

1 

i 

1 

s 

1 

o 

1 

1 

'      O 

Z 

O 

H 

H 

^ 

27 


The  separation  of  the  commercial  truck  rates  from  the  pleasure 
car  rates  was  effected  because  the  committee  believed  that  the  ex- 
perience on  the  one  diverged  to  a  considerable  extent  from  the  ex- 
perience on  the  other.  A  general  comparison  of  the  two  new 
schedules  shows,  for  example,  that  the  fire  rates  on  commercial 
trucks  are  higher  than  those  fixed  for  "  Pleasure  cars,"  while  the 
theft  rates  are  considierably  lower,  especially  for  the  cheaper 
models.  The  committee  decided,  after  an  examination  of  the  avail- 
able data  which  indicated  that  comparatively  few  trucks  were 
stolen,  that  the  theft  rates  on  commercial  trucks  should  be  materi- 
ally decreased.  The  following  nominal  charges  for  theft  coverage 
only  have  been  provided  in  the  new  rates : 

COMMERCIAL  VEHICLES—  (THEFT  ONLY) 
After  January  1,  1017 


Class  A, 
S3, 500 
and  up 


Class  B, 
$2,500 


Class  C, 
«1,400 

to 
$2,499 


Class  D, 
$800 


Class  E. 

$799 

and  under 


All  models  (regardless  of  age) . 


In  both  of  the  new  schedules 
been  fixed  as  follows : 


rates  for  second-hand  cars  have 


1.  "New  cars"  —  add  10c  to  rates  shown  in  each  class. 

2.  "One  year  old  cars"  —  add  25c  to  rates  shown  in  each  class. 

3.  "  Two  year  old  cars  "  —  add  50c  to  rates  shown  in  each  class. 

4.  "Three  year  old  cars"  —  add  75c  to  rates  shown  in  each  class. 

5.  "  Four  year  old  and  older  cars  "  —  add  $1.00  to  rates  shown  in  each  class. 

Rates   for  Elect ric   Automohiles   have   been   changed   slightly. 
They  are  as  follows: 

ELECTEIC   AUTOMOBILES—  (PLEASURE    AND    COMMERCIAL) 


Ye/ve  op  Model 

VALUED  FIRE, 

THEFT  AND 

TRANSPORTATION 

NON-VALUED  FIRE, 

THEFT  AND 

TRANSPORTATION 

NON-VALUED  FIRE 

AND 
TRANSPORTATION 

New 

Second 
hand 

New 

Second 
hand 

New 

Second 
hand 

This  and  next  year's  models. .  .  . 

This  and  last  year's  models 

Year  before  last  models 

$1  25 
1   50 

1  75 

2  00 
2  25 

$1   30 

1  90 

2  20 
2  50 

$1    00 

1  25 
1  50 

1  75 

2  00 

$1  05 
1  35 
1   65 

1  95 

2  25 

$0  90 
1   15 
1  40 
1  65 
1  90 

$0  95 
1   25 
1   55 
1  85 

Older  models 

2  15 

28 

The  rates  for  Dealers'  AutomohUes  have  been  fixed  as  follows: 

1.  Xon-valued  fire  and  transportation  policy:  Charge  building  contents  fire 
rate.     Minimum  rate  1%. 

2.  Non-valued  fire,  transportation  and  thpft:  Add  25c  to  fire  rate  required 
for  non-valued  fire  policy.     Minimum  rate  1.15%. 

3.  Valued  fire,  transportation  and  theft  policy:  Add  10c  to  rate  required 
above  for  non-valued  policy.    Minmum  rate  1.25%. 

Second  Hand  Cars:     Charge  1%  additional  to  above  rates. 

Cancellations:  Pro  rata  cancellations  allowed  provided  a  niimimum  charge  of 
$1.00  is  secured  for  all  cars  listing  .$1,200  and  over,  and  ..30  for  all  cars  listing 
under  $1,200. 

It  is  also  provided  that  where  the  dealer  has  more  than  one 
storage  or  selling  location  in  any  one  city  or  town,  the  bnilding 
contents  rate  of  the  highest  rated  location  must  be  charged. 

The  rate  schedules  shown  above,  have,  up  to  this  time,  been  pro- 
mnlgated  only  for  the  Eastern  and  Xew  England  Conferences. 
Schedules  have  also  been  prepared  for  the  other  three  Conferences 
and  will  be  definitely  adojited  as  soon  as  they  are  approved  by  the 
Local  Conferences  and  the  Xational  Conference.  Such  rates  will 
not  be  the  same  as  those  already  promulgated  but  will  probably 
provide  for  a  differential  to  allow  for  special  conditions  in  the  ter- 
ritory of  the  other  Local  Conferences. 

COLLISIOX   AND  PeOPERTY  DaMAGE  RaTES 

Most  of  the  collision  and  property  damage  insurance  is  written 
by  casualty  companies.  The  rates,  therefore,  for  this  class  of  busi- 
ness have  been  promulgated  for  the  use  of  such  companies,  by  the 
Workmen's  Compensation  Service  Bureau;  and  these  rates  have 
been  adopted  by  the  fire  and  marine  companies  composing  the 
membership  of  the  Conference. 

For  collision  rates,  private  pleasure  cars  have  been  classified  ac- 
cording to  manufacture,  list  price  and  model,  and  flat  rates  have 
been  established  for  the  "  deductible  average  "  and  "  full  cover- 
age" forms,  (described  previously  under  "Policy  Forms").  These 
rates  range  from  $28  for  Class  lA  to  $200  for  Class  Z  in  $5  and 
$10  gradations,  covering  the  "  deductible  average  "  form.  The 
"  full  coverage  "  form  demands  a  $35  additional  charge  for  each 
class.  Livery  vehicles  are  rated  the  same  as  private  pleasure  cars 
pins  twenty  per  cent,  additional.     Public  cm^s  other  than  livery 


29 


^Bhicles  are  rated  at  four  per  cent,  of  list  price,  and  plus  $35  for 
"  full  coverage  "  form.  Commercial  cars  are  rated  at  two  and  two- 
fifths  per  cent,  of  list  price  and  plus  $35  for  "  full  coverage  "  form. 
It  will  thus  be  noted  that  all  collision  rates  are  based  upon  the  list 
price  of  the  car. 

In  casualty  companies,  the  maximum  liability  is  limited  only  by 
the  cost  of  the  car,  and  therefore  full  insurance  up  to  the  list  price 
is  afforded  for  these  rates.  However,  fire  policies  usually  limit  the 
liability  to  the  amount  specified  in  the  policy,  and  such  limit  is  not, 
in  every  instance,  the  actual  list  price  of  the  car.  That  is,  a  car 
listed  at  $5,000  may  be  insured  for  only  $-1,000  and  the  rate  would 
be  based  upon  the  list  price  of  $5,000,  although  only  $4,000  proi- 
tection  was  afforded. 

Property  damage  rates  for  private  pleasure  automobiles  are 
based  upon  the  horsepow^er  of  the  car,  and  apply  to  $1,000  of  in- 
surance, four  per  cent  additional  being  added  for  each  $100  of 
insurance  in  excess  of  the  $1,000.  In  applying  these  rates,  six 
groups  of  districts  have  been  defined  and  schedules  of  rates  adopted 
for  each  district,  as  follows : 


Sched- 
ule 

Territory 

16-horsepower 
machine 

60-horseiDOwer 
machine 

1 
2 

Chicago  (commercial  cars) ,  Greatef  New  York 

(Per  $1,000) 

$8   15 

5  65 

5  65 

8  15 

5  65 
4  90 

(Per  $1,000) 

825  90 
21   65 

3 

Boston  and  vicinity 

18  65 

4 

23  40 

5 
6 

Albany,  Baltimore,  Buffalo,  Cleveland,  Cincinnati,  De- 
troit, Jersey  City,  Indianapolis,  Pittsburg,  Milwaukee, 
etc..  and  country  sections  of  various  states 

All  other  territory 

20  15 
14  95 

It  will  be  noted  from  the  above  table  that  the  higher  rates  are 
charged  in  the  large  cities,  and  more  thickly  settled  sections  of  the 
countiy  (except  Tennessee,  Kentucky  and  Alabama). 

Collision  rates,  on  the  other  hand,  are  obtained  from  one  sched- 
ule for  all  sections  of  the  country.  It  would  seem  that  if  country 
risks  are  specially  classified  in  regard  to  property  damage  rates, 
such  preferred  classification  should  also  be  made  for  collision  rates. 
While  admitting  the  general  theory  that  there  is  greaier  hazard 
under  both  these  coverages  in  congested  centers,  the  Association 
contends  that  the  additional  cost  of  settling  the  country  collision 


30 

losses  on  account  of  inferior  facilities,  offsets  to  a  veiy  larae  extent 
the  lesser  probability  of  accident. 

Public  vehicle  rates  are  established  according  to  the  above  dis- 
tricts and  are  based  upon  carrying  capacity. 

Comirtercial  cars  are  rated  according  to  the  nature  of  the  busi- 
ness and  the  territory  in  which  they  operate. 

In  August,  1916,  a  Conunittee  was  appointed  by  the  National 
Conference  to  join  with  the  Autouiobile  Connnittee  of  the  Work- 
men's Compensation  Service  Bureau  for  the  puii^ose  of  recommend- 
ing to  the  companies  new  rules  and  rates  for  the  writing  of  prop- 
erty damage  and  collision  insurance.  This  joint  committee  has  had 
several  meetings  and  has  recommended  various  uniform  rules  and 
definitions  as  to  coverage  and  rates,  but  no  action  has  as  yet  been 
taken  on  such  recommendations. 

Attitude  Towaeu  Competitors 
Organizations  like  this  Conference  are  subject  to  more  or  less 
competition  from  non-members.  While  some  such  competition  has 
always  existed,  it  has  never  become  serious  enough  to  require 
drastic  action,  although  company  members  have  been  permitted  to 
reduce  rates  to  meet  local  competition  collision  and  property  dam- 
age insurance  in  Missouri. 

As  the  success  of  a  conference  like  this  depends  upon  the  co-op- 
eration of  the  gTeatest  possible  number  of  companies  in  the  busi- 
ness, efforts  have  been  made  and  are  now  being  made  to  induce 
new  members  to  join  the  Conference,  or  at  least  adhere  to  Confer- 
ence rules  and  rates.  In  any  event  the  control  of  the  business  by 
the  Conference  (at  least  in  the  Eastern  and  Xew  England  Confer- 
ences) bids  fair  to  become  complete,  insofar  as  the  members  them- 
selves live  up  to  Conference  rules,  since  only  about  six  fire  com- 
panies writing  automo'l)ile  insurance  in  these  territories  are  non- 
Conference  companies.  And  where  the  Conference  has  furnished 
rates  to  non-members,  even  such  companies  have  quite  generally 
adhered  to  these  rates. 

In  accordance  with  the  usual  practice  of  organizations  like  this, 
Conference  companies  are  not  permitted  to  reinsure  any  automo- 
bile business  for  a  non-member,  unless  such  non-member  reinsures 
its  entire  automobile  writings  for  the  purpose  of  discontinuing  the 
business. 


31 

The  interests  of  the  Conference  companies  clash  with  those  of 
other  companies  in  the  writing  of  property  damage  and  collision  in- 
surance. Although  the  bulk  of  this  business  now  goes  to  the  casu- 
alty companies,  the  Conference  uses  the  rates  promulgated  by  the 
casualty  bureau,  and  works  in  harmony  with  it,  even  to  the  extent 
of  allowing  company  members  to  unite  with  casualty  companies  in 
reducing  rates  to  meet  local  competition  of  non-board  companies. 

The  effect  upon  rates  of  the  actual  and  potential  competition  of 
non-Conference  companies,  cannot  of  course  be  determined.  But 
any  attempts  to  raise  rates  are  usually  met  by  some  objection  on 
the  part  of  members  to  the  effect  that  non-Conference  companies 
may  secure  the  business  if  such  rates  are  raised. 

Statistics 

One  of  the  objects  of  the  JSTational  Automobile  Underwriters' 
Conference  is  to  further  intelligent  underwriting  by  its  members. 
This  necessarily  involves  the  gathering  and  tabulation  of  proper 
experience  statistics  for  the  making  of  rates.  Up  to  the  date  of 
this  examination,  no  statistics  have  been  compiled  which  could 
justify  the  rates  now  in  use  or  those  to  be  ]3romulgated  after 
January  1,  1917,  owing  largely  to  the  unstable  character  of  the 
Conferences  in  the  past. 

While  members  of  various  committees  which  have  promulgated 
or  revised  rates  may  have  used  the  experience  of  individual  com- 
panies, all  rates  adopted  were  apparently  based  more  upon  "  under- 
writing judgment "  of  the  members  than  upon  any  data  or  statis- 
tics collected  from  the  company  members. 

Each  revision  of  the  regular  schedules  of  rates  has  shown  a  tend- 
ency to  reduce  the  rates  on  the  higher  priced  cars  and  to  increase 
the  rates  on  the  lower  priced  cars,  although  no  statistics  exist  in 
the  Conference  records  to  warrant  such  action.  Moreover,  some 
underwriters  contend  that  risks  located  in  country  districts  and 
small  towns  are  less  hazardous  than  risks  located  in  cities,  and  this 
opinion  is  reflected  in  the  lower  property  damage  rates  allowed  for 
country  districts.  jSTeither  this  Conference,  nor  the  local  Eastern 
Conference  has  obtained  any  statistics  which  would  indicate  any 
difference  in  hazard  between  risks  situated  in  different  localities. 

While  the  entire  lack  of  statistics  in  the  records  of  the  former 


32 

Automobile  Underwriters'  Conference  was  criticized  in  the  ex- 
amination of  that  organization  by  this  Department  in  December, 
1911,  and  reiterated  in  December,  1915,  no  serious  efforts  have 
been  exerted  to  correct  this  condition,  until  the  organization  of  the 
present  N"ational  Conference  in  August,  1916.  At  that  time,  the 
Manager  of  the  Conference  made  an  attempt  to  obtain  experience 
statistics  from  individual  companies  for  rate-making  purposes. 
Few  companies  responded  and  he  found  it  impossible  to  combine 
the  figures  to  anv  extent  owing  to  the  lack  of  uniformity  in  their 
compilation. 

Statistical  blanks  were  accordingly  prepared  calling  for  experi- 
ence from  January  1,  1917,  and  are  now^  being  distributed  among 
the  companies.     But  such  returns  will  not  be  available  until  June 

With  the  regular  schedule  of  rates  promulgated  by  the  Confer- 
ence generally  in  the  hands  of  the  agents  and  brokers,  little  occasion 
arises  for  the  questioning  of  the  make-up  of  any  general  rate,  on  the 
part  of  an  assured  or  his  agent.  But  there  is  always  the  possibility 
of  inquiries  arising  concerning  special  rates,  and  special  schedules 
which  originate  at  Conference  headquarters  and  the  elements  of 
which  are  not  actually  known  to  agents  or  brokers.  As  a  matter 
of  fact,  various  assureds  or  their  representatives  have  appeared  at 
the  office  of  the  Eastern  Conference  upon  several  occasions  and  in- 
quired about  the  make-up  of  special  rates  applicable  to  commercial 
fleets.  In  each  case,  the  application  has  been  produced  and 
checked  back  to  the  commercial  fleet  schedule.  In  the  matter  of 
special  rates  on  manufacturers'  risks  and  taxicabs,  however,  the 
Conference  records  are  incomplete  as  to  the  actual  make-up  of  the 
rate  covering  this  class  of  risks,  and  it  is  therefore  impossible  to 
obtain  a  complete  explanation  of  the  make-up  of  the  rate.  This 
condition  does  not  conform  to  section  141,  providing  that  every 
rating  organization  shall  keep  a  careful  record  of  its  proceedings, 
and  shall  furnish  upon  demand  to  any  person  upon  whose  property 
or  risk  a  rate  has  been  made,  full  information  as  to  such  rate. 

Adjustment  Bureau 
According  to  many  underwriters  of  automobile  insurance,  ex- 
cessive competition  has  adversely  affected  even   the  settling  of 


33 

losses,  so  that  there  is  now  considerable  competition  in  making  nn- 
justitiably  liberal  settlements  to  get  and  hold  business  —  especially 
collision  insurance.  This  overpayment  of  claims,  according  to 
these  insurers,  is  becoming  a  more  and  more  widespread  menace  to 
the  business  because  of  the  inadequacy  of  the  rates  to  cover  such 
excessive  loss  payments. 

In  the  belief  that  the  elimination  of  excessive  competition  in 
rates  and  policy  provisions  should  be  supplemented  by  the  elimi- 
nation of  competition  in  the  payment  (or  over-payment)  of  claims, 
and  that  one  would  be  almost  useless  without  the  other,  the  Local 
Conferences  have  adopted  a  provision  in  their  constitution  provid- 
ing for  the  establishment  of  a  bureau  for  the  common  adjustment 
of  losses  in  each  Local  Conference.  At  present,  each  company 
member  of  a  Local  Conference  adjusts  its  own  losses,  and  many  of 
them  are  put  to  considerable  expense  in  efforts  to  prevent  fraudulent 
claims  and  to  recover  stolen  cars.  The  Adjustment  Bureau  is  de- 
signed to  obtain  more  effective  action  in  the  equitable  adjustment 
of  claims,  in  the  prevention  of  fraudulent  claims,  and  in  the  re- 
covery of  stolen  cars. 

Hence  each  member  will  be  obligated  to  report  every  loss 
promptly,  with  such  detailed  information  as  may  be  required  by 
the  Adjustment  Bureau.  These  reports  will  be  indexed  and  filed 
by  the  Bureau  for  the  benefit  of  the  members  of  the  Local  Confer- 
ence. In  fact,  there  is  already  in  existence  in  the  Eastern  Confer- 
ence, a  system  of  reporting  losses  and  claims,  established  by  the 
former  Automobile  Underwriters'  Conference.  This  system  aids 
the  adjuster,  after  a  loss  has  occurred,  in  detecting  fake  claims,  iden- 
tifying stolen  cars,  preventing  multiple  collection  for  the  same  loss, 
and  investigating  the  past  record  of  the  assured.  Each  loss  cr 
claim  is  reported,  on  a  card,  giving  full  jnirticulars,  and  these 
cards  are  indexed  as  to  assureds  and  cars.  This  service  is  n(»w 
available  to  members  as  an  underwriting  aid  to  enable  them  to  de- 
termine the  desirability  or  undesirability  of  a  risk. 

TXFORMATION    AND    SeEVICE    BuREAU 

Initial  steps  have  been  taken  in  the  organization  of  an  Informa- 
tion and  Service  Bureau  under  the  direct  charge  of  the  General 
Manager  of  the  National  Conference.     This  is  desioned  to  furnish 


34 

an  interchange  of  helpful  information  among  the  various  Local 
Conferences  with  respect  to  undesirable  risks  and  weaknesses  in 
present  underwriting  methods ;  to  provide  a  legislative  service, 
which  will  keep  members  informed  regarding  proposed  legislation 
in  the  different  states  relating  to  the  automobile  business,  and  de- 
signed to  take  care  that  unwise  legislation  is  not  permitted  to 
go  on  the  statute  books,  in  default;  to  obtain  and  combine 
proper  experience  data  so  as  to  make  possible  an  intelligent 
analysis  of  past  underwriting  results  and  so  form  a  solid  founda- 
tion for  future  rates ;  to  continue  the  issuance  of  list  price  manuals 
to  members,  and  to  perform  other  services  of  a  similar  character 
as  the  necessity  arises. 

Summary 

From  the  foregoing  report  it  can  be  seen  that  earnest  efforts  are 
being  made  to  organize  an  effective  national  body  to  regiilate  and 
control  the  business  of  automobile  insurance  carried  on  by  fire  and 
marine  companies  throughout  the  country.  Standard  policies  have 
been  drawn  up,  commissions  are  being  regulated,  rules  for  the  con- 
duct of  the  business  established,  a  service  and  infonnation  bureau 
started,  and  rates  promulgated.  By  a  system  of  local  autonomy 
combined  with  a  species  of  national  control,  it  is  hoped  to  elimi- 
nate, as  far  as  possible,  general  upheavals  and  cut-throat  competi- 
tion which  have  proven  so  disastrous  to  the  liability  field.  But  the 
right  to  organize  along  these  lines  and  maintain  rates,  cari-ying  with 
it  as  it  does  a  degree  of  monopolistic  power,  involves  the  obligation 
to  justify  every  activity  in  the  light  of  reason. 

Particular  attention,  therefore,  is  directed  to  the  following  mat- 
ters, dealt  with  in  detail  in  the  foregoing  report : 

Under  "  Special  Rates  on  Commercial  Fleets,"  provision  should 
be  made  to  remove  the  possibility  of  ''  unfair  discrimination " 
wdiich  might  arise  from  rating  commercial  fleets  upon  the  two 
different  schedules,  namely,  the  regular  "  Commercial  Truck " 
Schedule,  and  the  special  "  Commercial  Fleet  "  Schedule.  More- 
over, the  restriction  of  the  application  of  this  special  fleet  schedule 
to  fleets  whose  insurance  must  amount  to  $15,000  is  an  apparent 
violation  of  section  141,  and  results  in  "  unfair  discrimination  " 
which  should  be  removed.     This  same  objection  may  be  raised  in 


35 

regard  to  policies  covering  dealers'  risks  with  an  initial  premium 
of  at  least  $500,  which  are  likewise  entitled  to  special  rating. 

Under  "  Special  Eates  on  Commercial  Fleets,"  attention  is  di- 
rected to  the  possible  violation  of  the  provisions  of  section  141  due 
to  requiring  all  cars  of  any  fleet  to  be  insured  by  members  of  the 
Conference  in  order  to  secure  this  special  rate,  this  section  of  the 
law  not  permitting  the  making  of  a  rate  conditioned  on  the  placing 
of  all  the  insurance  at  such  rate  with  the  members  of  the  Confer- 
ence. 

Under  "  Special  Rates  on  Manufacturers'  Cars  and  Taxicabs," 
it  will  be  noted  that  although  attention  was  called  to  the  report  on 
examination  of  the  former  Automobile  Underwriters'  Conference 
in  December,  1011,  to  the  unfair  discrimination  caused  by  speci- 
ally rating  risks  involving  twenty  ta:xicabs  or  more,  no  steps  have 
been  taken  to  remove  such  unfair  discrimination,  and  the  same 
condition  still  exists. 

Moreover,  it  is  necessary  to  file  more  complete  information  as 
to  the  make-up  of  all  special  rates,  in  order  that  the  Conference 
may  conform  to  the  law,  as  stated  in  section  141,  requiring  the 
furnishing  of  full  information  as  to  any  rate,  upon  demand,  to  any 
person  upon  whose  property  or  risk  the  rate  has  been  made. 

Referred  to  under  ''  Statistics."  At  this  date,  there  exist  no 
statistics  compiled  either  by  the  former  or  the  present  Conference, 
available  to  establish  rates  or  to  test  the  fairness  or  adequacy  of  ex- 
isting rates.  It  thus  appears  that  the  former  Automobile  Under- 
writers' Conference  and  the  present  National  Conference  have  di- 
rected .their  efforts  toward  maintaining  rates  which  have  been  pro- 
mulgated rather  haphazardly ,  and  the  justice  of  which  cannot  be 
sustained  by  any  general  statistics  Avhatever  —  dependence  having 
been  placed  more  upon  the  individual  underwriter's  judgment  and 
experience.  Intelligent  and  serious  efforts  are  now  being  made  to 
remedy  this  situation. 

The  following  exhibits  are  attached  to  this  report:  (1)  List  of 
Members;  (2)   Territorial  Division. 

Respectfully  submitted, 

JNIakcy  Feder, 

Examiner. 


36 

STATE  OF  NEW  YOEK, 
County  of  New  Yobk, 
Marcy  Fedtr,  being  duly  sworn,  deposes  and  says  that  the  foregoing  report 
subscribed  by  him,  being  an  amendment  of  the  one  subscribed  and  sworn  to 
on  date  of  January  20,  1917,  is  true  to  the  best  of  his  knowledge  and  belief. 

ilARCY   FeDEB. 

Subscribed  and  sworn  to  before  me 
this  27th  day  of  March,  1917. 

Edwabd  J.  O'Dea, 
[  Seal.]  Notary  Public,  Bronx  County. 

Certificate  filed  in  N.  Y.  County. 

I 

Members  of  National  Conference 

Aetna  Accident  and  Liability  Co Hartford,  Conn. 

Aetna  Insurance  Co Hartford,  Conn. 

Alliance  Assurance  Co New  York,  N.  Y. 

Alliance  Insurance  Co Philadelphia,  Pa. 

American  and  Foreign  Marine  Insurance  Co New  York,  N.  Y. 

American  Central  Insurance  Co St.  Louis,  Mo. 

American  Insurance  Co.  of  Newark Newark,  N.  J. 

Atlas  Assurance  Co New  York,  N.  Y. 

Automobile  Insurance  Co.  of  Hartford Hartford,  Conn. 

Boston  Insurance  Co Boston,  Mass. 

British  and  Foreign  Marine  Insurance  Co New  \ork,  X.  Y. 

British  and  Foreign  Marine  Insurance  Co Philadelphia,  Pa. 

Clay,  Henry,  Fire  Insurance  Co Lexington,  Ky. 

Columbia  Insurance  Co New  York,  N.  Y. 

Commercial  Union  Assurance  Co New  York,  N.  Y. 

Commercial  Union  of  New  York Xe'W  York,  N.  Y. 

Commonwealth  Insurance  Co New  York,  N.  Y. 

Connecticut  Fire  Insurance  Co Hartford,  Conn. 

Continental  Fire  Insurance  Co New  York,  N.  Y. 

Federal  Insurance  Co New  York,  N.  Y.» 

Fidelity-Phenix  Insurance  Co New  York,  N.  Y. 

Firemans  Fund  Insurance  Co New  York,  N.  Y. 

Equitable  Fire  and  Marine  Insurance  Co Providence,  R.  I. 

German  American  Insurance  Co New  York,  N.  Y. 

Glens  Falls  Insurance  Co Glens  Falls,  N.  Y. 

Globe  and  Rutgers  Fire  Insurance  Co New  York,  N.  Y. 

Hand-in-Hand  Underwriters New  York,  N.  Y. 

Hanover  Fire  Insurance  Co New  York,  N.  Y. 

Hartford  Fire  Insurance  Co Hartford,  Conn. 

Home  Insurance  Co New  York,  N.  Y. 

Indemnity  Mutual  Marine  Assurance  Co New  York,  N.  Y. 

Insurance  Co.  of  North  America Philadelphia,  Pa. 

Insurance  Co.  of  State  of  Pennsylvania New  York,  N.  Y. 


37 

Liverpool  and  Ltnidon  and  CIoIk'   Insuiain^e  Co New  ^  ork,  N.  Y. 

London  and  Lancashire  Fire  Insurance  (  o Hartford,  Conn. 

Mannheim  Insurance  Co New  York,  N.  Y. 

Marine  Insurance  Co New  York,  N.  Y. 

Maryland  Motor  Car  Insurance  Co Baltimore,   Md. 

Massachusetts  Fire  and  Marine  Insurance  Co Boston,  Mass. 

Mercantile  Insurance  Co New  York,  N.  Y. 

Michigan  Commercial  Insurance  Co Lansing,  Mich. 

Milwaukee  Mecluinics  Insurance  Co Milwaukee,  Wis. 

National-Ben  Franklin  Insurance  Co Pittsburgh,  Pa. 

National  Fire  Insurance  Co.  .  .' Hartford,  Cunn. 

Newark  Fire  Insurance  Co Newark,  N.  J. 

Niagara  Fire  Insurance  Co New  York,  N.  Y. 

Nord-Deutsche  Insurance  Co New  York,  N.  Y. 

North  British  and  Mercantile  Insurance  Co New  Y'ork,  N.  Y. 

Norwich  Union  Fire  Insurance  Society -New  Y'ork,  N.  Y. 

Ociean  Marine  Insurance  Co New  York.  N.  Y. 

Old  Colony  Insurance  Co Boston,  Mass. 

Orient  Insurance  Co Hartford,  Conn. 

Palatine  Insurance  Co New  York,  N.  Y. 

Pennsylvania  Fire  Insurance  Co Philadelphia,  Pa. 

Phoenix  Assurance  Co New  York,  N.  Y. 

Phoeni.x:  Insurance  Co Hartford,  Conn. 

Providence  ^Vashington  Insurance  Co Providence,  E.  I. 

Prussian  National  Insurance  Co Chicago,  111. 

Queen  Insurance  Co '  Chicago,  111. 

Queen  Insurance  Co New  York,  N.  Y. 

Reliance  Marine  Insurance  Co New  York,  N.  Y. 

Royal  Exchange  Assurance  Co New  York,  N.  Y. 

Royal  Insurance  Co New  York.  N.  Y. 

Royal  Insurance  Co.  (Field  &  Cowlcs) ,  .  .  .85  Water  St.,  Boston. 

Royal  Insurance  Co KU)  West  Jackson  ]51vd. 

Chicago,  111. 

Royal  Insurance  Co Atlanta,  Ga. 

Safe  Guard  Insurance  Co Hartford,  Conn. 

Scottish  Uilion  and  National  Insurance  Co Hartford,  Conn. 

St.  Paul  Fire  and  Marine  Insurance  Co St.  Paul,  Minn. 

Seal  Insurance  Co New  York,  N.  Y'. 

Springfield  Fire  and  INIarine  Insurance  Co Springfield,  Mass. 

Stuyvesant  Insurance  Co New  York,  N.  Y. 

Thames  and  INIersey  Marine  Insurance  Co ^.  .  New  York,  N.  Y. 

Tokio  Marine  Insurance  Co New  York,  N.  Y. 

Union  Assurance  Co New  York,  N.  Y. 

Union  Marine  Insurance  Co New  York,  N.  Y. 

United  States  Lloyds New  York,  N.  Y. 

Westchester  Fire  Insurance  Co New  York,  N.  Y. 

Williamsburgh  City  Fire  Insurance  Co New  York,  N.  Y'. 


.  ^  r^pc^k  o1  any 
Bldg.  400,  ""-„  |i,orn\a 


Bldg.  AOO,  »  ■="  |i,orn\a 
UnwersUV  of  Ca^>  g^^  ,g98 


UnWetsuv  "■      g^gOA-ABao         ^ -- 

"^;rtdoeda.e ^ ^ 


914467 

ff/1  ■ 

THE  UNIVERSITY  OF  CALIFORNIA  LIBRARY 


